Following the rapid spread of the coronavirus, many companies are severely affected. One of the most affected is the oil industry as they are not selling petroleum products as before. A large number of world countries depend on the revenue generated by this industry. For instance, Saudi Arabia and Russia are currently on a serious talk about a significant hike in oil prices. Here are some of the outcomes of the pandemic on the oil industry.
prices around the world remain on edge
For a month now, Russia and Saudi Arabia have been in an oil price war. The situation is getting worse as they postponed a meeting to cut output as the pandemic hits high demand. Traders in the oil sector, there is too much crude in their stores as people are under lockdown. As a result, they have no option but to put pressure on prices. Consequently, the Asian trade, Brent crude, has recorded a 12% fall although they have recovered some grounds.
Similarly, US trade oil, West Texas Intermediate records more than a 10% drop before stabilizing to a reasonable percentage. As scheduled, both countries were to hold a meeting on Monday, but now it is pushed to Thursday. As a result, oil prices are to remain high until then. Now, the global market possesses far more stock than expected as the two nations are in a month-long oil price war. The price war came after a deal to cut production collapsed last month.
At the moment, United States oil has fallen by almost two thirds, and they have recorded their worst quarter in three months. The impact has forced the American energy sector to break the agreement in place between Russia and Saudi Arabia. Donald Trump said that he expected the two nations to cut supply as Saudi Arabia had called for a producer’s urgent meeting. The Russian energy minister says his country might re-start talks.
Oil plunge by 10% as OPEC deal fails
The main agenda was to maintain steady oil prices, but now the demand is a bit low as people are under lockdown. It is logical; the coronavirus has resulted in minimal travels as well as manufacturing and global chains. Furthermore, the Russian government refused to participate; therefore, there was no new deal to restrain production.
The independence of Russia has led to the biggest fall in revenue ever. For instance, the Brent Crude suffers a nine percent fall, equivalent to about $45.27 per barrel. Additionally, West Texas records a 10.1% fall, equal to $41.28 per barrel. It is the biggest fall since 2014 as well as the lowest output level since 2016.
Conclusion
The coronavirus outbreak is negatively affecting the economy. It is high time we come up with stunning ideas to survive this situation. Besides, let us not keep on fighting instead of focusing. Remember, oil prices have tumbled by thirty percent since the year began. In my opinion, the two oil producers should agree at least to support each other during this hard time.
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